Impact of liberalization on efficiency and productivity of sugar industry in Kenya

Purpose – The data used in this study is for the period 1980-2000. Almost midway through this period (in 1992), the Kenyan government liberalized the sugar industry and the role of the market increased, while the government's role with respect to control of prices, imports and other aspects in the sector declined. This exposed the local sugar manufacturers to external competition from other sugar producers, especially from the COMESA region. This study aims to find whether there were any changes in efficiency of production between the two periods (pre and post-liberalization). Design/methodology/approach – The study utilized two methodologies to efficiency estimation: data envelopment analysis (DEA) and the stochastic frontier. DEA uses mathematical programming techniques and does not impose any functional form on the data. However, it attributes all deviation from the mean function to inefficiencies. The stochastic frontier utilizes econometric techniques. Findings – The test for structural differences in the two periods does not show any statistically significant differences between the two periods. However, both methodologies show a decline in efficiency levels from 1992, with the lowest period experienced in 1998. From then on, efficiency levels began to increase. Originality/value – To the best of the authors' knowledge, this is the first paper to use both methodologies in the sugar industry in Kenya. It is shown that in industries where the noise (error) term is minimal (such as manufacturing), the DEA and stochastic frontier give similar results.

Evaluation of research in efficiency and productivity:a survey and analysis of the first 30 years of scholarly literature in DEA

Since the original Data Envelopment Analysis (DEA) study by Charnes et al. [Measuring the efficiency of decision-making units. European Journal of Operational Research 1978;2(6):429–44], there has been rapid and continuous growth in the field. As a result, a considerable amount of published research has appeared, with a significant portion focused on DEA applications of efficiency and productivity in both public and private sector activities. While several bibliographic collections have been reported, a comprehensive listing and analysis of DEA research covering its first 30 years of history is not available. This paper thus presents an extensive, if not nearly complete, listing of DEA research covering theoretical developments as well as “real-world” applications from inception to the year 2007. A listing of the most utilized/relevant journals, a keyword analysis, and selected statistics are presented.

Technical efficiency:efficiency, change, technical progress and productivity growth in the national health systems of continental African countries

In May 2006, the Ministers of Health of all the countries on the African continent, at a special session of the African Union, undertook to institutionalise efficiency monitoring within their respective national health information management systems. The specific objectives of this study were: (i) to assess the technical efficiency of National Health Systems (NHSs) of African countries for measuring male and female life expectancies, and (ii) to assess changes in health productivity over time with a view to analysing changes in efficiency and changes in technology. The analysis was based on a five-year panel data (1999-2003) from all the 53 countries of continental Africa. Data Envelopment Analysis (DEA) - a non-parametric linear programming approach - was employed to assess the technical efficiency. Malmquist Total Factor Productivity (MTFP) was used to analyse efficiency and productivity change over time among the 53 countries' national health systems. The data consisted of two outputs (male and female life expectancies) and two inputs (per capital total health expenditure and adult literacy). The DEA revealed that 49 (92.5%) countries' NHSs were run inefficiently in 1999 and 2000; 50 (94.3%), 48 (90.6%) and 47 (88.7%) operated inefficiently in 2001, 2002, and 2003 respectively. All the 53 countries' national health systems registered improvements in total factor productivity attributable mainly to technical progress. Fifty-two countries did not experience any change in scale efficiency, while thirty (56.6%) countries' national health systems had a Pure Efficiency Change (PEFFCH) index of less than one, signifying that those countries' NHSs pure efficiency contributed negatively to productivity change. All the 53 countries' national health systems registered improvements in total factor productivity, attributable mainly to technical progress. Over half of the countries' national health systems had a pure efficiency index of less than one, signifying that those countries' NHSs pure efficiency contributed negatively to productivity change. African countries may need to critically evaluate the utility of institutionalising Malmquist TFP type of analyses to monitor changes in health systems economic efficiency and productivity over time. African national health systems, per capita total health expenditure, technical efficiency, scale efficiency, Malmquist indices of productivity change, DEA

Measurement efficiency and productivity in SAS/OR

This paper explores the use of the optimisation procedures in SAS/OR software with application to the measurement of efficiency and productivity of decision-making units (DMUs) using data envelopment analysis (DEA) techniques. DEA was originally introduced by Charnes et al. [J. Oper. Res. 2 (1978) 429] is a linear programming method for assessing the efficiency and productivity of DMUs. Over the last two decades, DEA has gained considerable attention as a managerial tool for measuring performance of organisations and it has widely been used for assessing the efficiency of public and private sectors such as banks, airlines, hospitals, universities and manufactures. As a result, new applications with more variables and more complicated models are being introduced. Further to successive development of DEA a non-parametric productivity measure, Malmquist index, has been introduced by Fare et al. [J. Prod. Anal. 3 (1992) 85]. Employing Malmquist index, productivity growth can be decomposed into technical change and efficiency change. On the other hand, the SAS is a powerful software and it is capable of running various optimisation problems such as linear programming with all types of constraints. To facilitate the use of DEA and Malmquist index by SAS users, a SAS/MALM code was implemented in the SAS programming language. The SAS macro developed in this paper selects the chosen variables from a SAS data file and constructs sets of linear-programming models based on the selected DEA. An example is given to illustrate how one could use the code to measure the efficiency and productivity of organisations.

Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry:1985-2000

The water and sewerage industry of England and Wales was privatized in 1989 and subjected to a new regime of environmental, water quality and RPI+K price cap regulation. This paper estimates a quality-adjusted input distance function, with stochastic frontier techniques in order to estimate productivity growth rates for the period 1985-2000. Productivity is decomposed so as to account for the impact of technical change, efficiency change, and scale change. Compared with earlier studies by Saal and Parker [(2000) Managerial Decision Econ 21(6):253-268, (2001) J Regul Econ 20(1): 61-90], these estimates allow a more careful consideration of how and whether privatization and the new regulatory regime affected productivity growth in the industry. Strikingly, they suggest that while technical change improved after privatization, productivity growth did not improve, and this was attributable to efficiency losses as firms appear to have struggled to keep up with technical advances after privatization. Moreover, the results also suggest that the excessive scale of the WaSCs contributed negatively to productivity growth. © 2007 Springer Science+Business Media, LLC.

The frontier approach to the measurement of productivity and technical efficiency

In 1957, Farrell proposed to measure technical (in)efficiency as the realised deviation from a frontier isoquant. Since then, the research has developed several methods to derive the production frontier and it has also extended its scope in applying frontier techniques to the measurement of total factor productivity. In this paper, I present the core techniques for the measurement of technical efficiency and productivity based on the notion of frontier and introduce the more recent technological advances in the field.

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid technical change, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term cost-reducing effect in 1998, the crisis triggered a more lasting negative impact by increasing the volume of non-performing loans.

Has DRG payment influenced the technical efficiency and productivity of diagnostic technologies in Portuguese public hospitals? An empirical analysis using parametric and non‐parametric methods

The use of Diagnosis Related Groups (DRG) as a mechanism for hospital financing is a currently debated topic in Portugal. The DRG system was scheduled to be initiated by the Health Ministry of Portugal on January 1, 1990 as an instrument for the allocation of public hospital budgets funded by the National Health Service (NHS), and as a method of payment for other third party payers (e.g., Public Employees (ADSE), private insurers, etc.). Based on experience from other countries such as the United States, it was expected that implementation of this system would result in more efficient hospital resource utilisation and a more equitable distribution of hospital budgets. However, in order to minimise the potentially adverse financial impact on hospitals, the Portuguese Health Ministry decided to gradually phase in the use of the DRG system for budget allocation by using blended hospitalspecific and national DRG casemix rates. Since implementation in 1990, the percentage of each hospitals budget based on hospital specific costs was to decrease, while the percentage based on DRG casemix was to increase. This was scheduled to continue until 1995 when the plan called for allocating yearly budgets on a 50% national and 50% hospitalspecific cost basis. While all other nonNHS third party payers are currently paying based on DRGs, the adoption of DRG casemix as a National Health Service budget setting tool has been slower than anticipated. There is now some argument in both the political and academic communities as to the appropriateness of DRGs as a budget setting criterion as well as to their impact on hospital efficiency in Portugal. This paper uses a twostage procedure to assess the impact of actual DRG payment on the productivity (through its components, i.e., technological change and technical efficiency change) of diagnostic technology in Portuguese hospitals during the years 1992–1994, using both parametric and nonparametric frontier models. We find evidence that the DRG payment system does appear to have had a positive impact on productivity and technical efficiency of some commonly employed diagnostic technologies in Portugal during this time span.

Cost economies, efficiency and productivity growth in the Chinese banking industry:evidence from a quarterly panel dataset

This article examines cost economies, productivity growth and cost efficiency of the Chinese banks using a unique panel dataset that identifies banks' four outputs and four input prices over the period of 1995-2001. By assessing the appropriateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commercial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China.

Efficiency and total factor productivity changes of Malaysian commercial banks

This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

This study employs Stochastic Frontier Analysis (SFA) to analyse Malaysian commercial banks during 1996–2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalized Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68%, with the latter driven primarily by Technical Change (TC), which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid TC, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term costreducing effect in 1998, the crisis triggered a long-lasting negative impact by increasing the volume of nonperforming loans.

The efficiency and productivity of Malaysian banks:an output distance function approach

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in outputs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience mild decreasing return to scale and annual productivity change of 2.37 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. In addition, our productivity estimates indicate that the potential for full-fledged Islamic banks and conventional banks with Islamic banking operations to overcome the output disadvantages associated with Islamic banking are relatively limited. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had an interim output-increasing effect in 1998, the crisis prompted a continuing negative impact on the output performance by increasing the volume of non-performing loans.